Bookkeeping in Your Company’s First Year

Congratulations — the company is incorporated. Now comes the question every new owner asks a few weeks later: where does the accounting actually start? Get the first year right and every year after it is straightforward.

Day one: three things to set up

1. A separate company bank account

Open a company account and stop using your personal one for business money. Mixing the two is the single most expensive habit in SME accounting: it makes the ledger ambiguous, inflates the bookkeeping fee, and invites questions at audit and from the IRD.

2. A receipt-keeping habit

From the very first transaction, keep every invoice and receipt. Records must be retained for 7 years under Companies Ordinance s.373 and Inland Revenue Ordinance s.51C. Photograph paper receipts the day you get them — thermal paper fades within a year.

3. A filing structure

One folder per month, sub-folders for bank, sales and purchases. Name files consistently: 2026-04-15_supplier_1280.pdf. The method is set out in organising vouchers and records.

Choosing your financial year end

Hong Kong companies commonly choose 31 March or 31 December. The choice matters because it determines your block extension code and therefore your filing deadline:

A 31 March year end gives the longest run-up before the return is due, which is why it is the most common choice for a first-year company.

The monthly routine

1. Download the bank statement
2. Match every line to a document
3. Post and classify each transaction
4. Chase anything unmatched while you still remember it
5. Note the closing bank balance and compare with the ledger

Thirty minutes a month here saves days at year end.

Your first financial statements

At year end the ledger is closed, accruals and prepayments are made, depreciation is calculated, and the statements are drafted. These are the documents the auditor will examine — see audit arrangement.

The first-year timeline

A first return generally cannot be extended, so the audit needs to be finished promptly once the return arrives.

Five first-year mistakes

1. Using a personal bank account for company transactions
2. Assuming no trading means nothing to file
3. Losing the first few months of receipts before the habit forms
4. Choosing a year end without thinking about the filing deadline
5. Waiting for the tax return to arrive before starting the accounts

Want it set up properly from month one? See accounting and bookkeeping from HK$200 a month, or call 3687-1127.